Legal challenge threatens FDI

Late last year, the SA Commercial, Catering and Allied Workers Union (Saccawu) and the Departments of Agriculture, Trade and Industry, and Economic Development appealed an earlier decision by the Competition Tribunal to conditionally accept the Walmart/ Massmart deal. The Competition Appeal Court is expected to announce its decision on the $2.4bn transaction later this month.

The parties who brought the action fear the merger will harm workers and local suppliers. And they asked for the matter to be sent back to the tribunal in the hope of seeing stronger conditions imposed. If they succeed, Walmart could walk away from the deal. Economists say that while foreign direct investment will create jobs, increased competition among retailers will only benefit consumers. The UN Conference on Trade and Development (Unctad) warned in a report on FDI - released last week - that the downward quarterly trend in FDI projects, over the final quarter of last year, "indicates that the risks and uncertainties for further FDI growth remain in place".

After three years of consecutive declines, developed economies received $753.2bn last year - up 18.5 percent on the previous year. Developing economies absorbed $663.7bn last year, 13.7 percent more than in 2010. Of this, Africa attracted only $54.4bn, down marginally on the year before. According to Business Report, Economists.co.za's chief economist Mike Schussler said South Africa struggled to compete with developing countries. "To get... investment we need a wholesome environment for companies to operate in," he said. Last year the SA Treasury released a discussion document on FDI. It referred to a "policy gap", which prompted different responses by departments "on the position of government on investments that affect national interests". A co-ordinated framework would provide more certainty for investors, the document said.

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